Arbitrum Foundation Defends its AIP-1 Ratification Proposal

In Brief

• The Arbiitrum Foundation has defended itself against claims that its AIP-1 proposal was farcical.
• Members of the ARB community criticized the Foundation for making several centralized decisions prior to the launch of the DAO.
• Both the Arbitrum Foundation and Polygon Labs argue for a certain initial level of decentralization at critical points in a project's lifecycle.

The Arbitrum Foundation has responded to community backlash regarding the allocation of ARB tokens before the launch of Arbitrum DAO.
Rather than being a proposal to change the Arbitrum protocol, AIP-1 asked users to ratify the Foundation’s decisions made before the launch of the DAO, a move which did not sit well with many members of the Arbitrum community.

ARB Community Debates Merits of Voting to Ratify Early Plans
One community member questioned the weight of votes cast toward passing AIP-1 if the Foundation had already executed its plan.

“Whether Arbitrum Improvement Proposal 1 is a proposal or a ratification, it could be helpful to clarify what happens should the “against” vote win. If failure state isn’t considered, this might suggest the vote is only for show. The precedent you set for the DAO will set the tone for the future,” they argued.

Following community backlash, the Arbitrum token is down 5% in the last 24 hours to $1.22.

AIP-1 seeks to ratify several Arbitrum DAO decisions, including voting thresholds that permit the passage of certain governance proposals and the allocation of ARB tokens.

The proposal also names the DAO’s initial directors, including Campell Law, Edward Noyens, and Ani Banerjee. It also appoints twelve signatories of a multi-sig wallet as a Security Council. The Council can make quick decisions on any code changes the protocol requires.

Controversially, the proposal also allocates 750 million ARB tokens that the Foundation can use for grants.

Upon the DAO’s launch, analytics firm Nansen distributed over one billion tokens to participants in the Arbitrum ecosystem.

Arbitrum’s One and Nova networks improve Ethereum transaction throughput by processing transaction batches off-chain and sending compressed transaction data to the main chain as calldata.

Arbitrum Foundation Argues for Centralized Decision-Making
In response to the community backlash, the Arbitrum Foundation argued that stakeholders had to make key decisions before the DAO’s launch and the airdrop of its associated governance token.

These decisions included setting up the DAO governance smart contract to establish thresholds for passing governance proposals. Without this smart contract specifying how governance proposals would work, the Foundation argued, reaching a consensus on key decisions would be impossible.

However, the Foundation concedes that it could have better clarified that AIP-1 was ratification.

It also argued that the allocation of 750 million ARB tokens to itself, which represents 7.5% of the total supply of 10 billion tokens, was in line with other projects run by Polygon, the Starknet Foundation, and Optimism.

Polygon’s Foundation and Ecosystem Growth Contracts hold over 10% of its governance token supply. The Starknet Foundation maintains a 10% slush to bankroll activities in its ecosystem.

Path to Gradual Decentralization More Realistic, Argues Polygon Labs
Without a certain degree of decentralized decision-making, the Arbitrum Foundation argues, Arbitrum would not be able to compete with other ecosystems.

Similarly, Polygon Labs suggests that in critical phases of a product’s development, “benevolent dictators” make important decisions before governance is handed back to the community. It also argues that a community’s maturity will determine its progress toward greater decentralization.

Polygon Labs needed centralized entities to initiate partnerships with real-world corporations like Nike, Starbucks, and Adidas to promote the adoption of its sidechain. It recently announced the public beta of its zero-knowledge Ethereum layer-two scaling solution to improve transaction throughput on Ethereum.

Coinbase CEO Brian Armstrong stated the exchange would monitor transactions for anti-money laundering compliance on its recently-launched Base blockchain. Later, this process would become more decentralized, he said.

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